What Are ISPS Charges?

Whether you are an existing importer, exporter, trader or a novice in the shipping and trading business, you need to know thesecret to understanding sea freight rates before you enter into the business.

Unknown, unforeseen and unbudgeted shipping and freight costs could mean the end game for your business, so they need to be controlled and monitored closely.

If you have been checking your freight quotes or gone into theanatomy of a freight invoice, you would have noticed a charge called ISPS Charge or ISPS Surcharge or simply ISPS. This should not be considered as just another acronyms in the world of shipping otherwise filled with abbreviations.

This is a rather important item, something which has a deeper meaning than some of the other freight-related charges.

What Is The International Ship and Port Facility Security Code (ISPS)?

Well, it all started after the 9/11 attacks. The IMO (International Maritime Organization) realized that what happened in the air could also happen on the sea or via the sea. Thus, the IMO decided to develop, recommend and implement a set of security measures, applicable to ships and port facilities around the world.

These measures termed as the International Ship and Port Facility Security Code (ISPS). They are implemented through International Convention for theSafety of Life at Sea (SOLAS), 1974 chapter XI-2 to enhance maritime security.

Purpose of ISPS Code

The primary objective of the ISPS Code is to provide a standardized, consistent global framework across the maritime world. This will enable the countries that have subscribed to the code to evaluate, detect and assess the security risks to the ships calling at their ports and take appropriate measures to determine the security levels they must follow and the corresponding security/preventive measures to be taken.

to institute respective roles and responsibilities of all parties (governments and government agencies subscribed to the code, port administration and the shipping and port agencies) concerned, at a global and domestic level, to ensuring maritime security

to exchange/share relevant security related information

to assure shipowners that adequate and proportionate maritime security measures are in place for their ships

In terms of the ISPS code, shipping lines, ports and terminals are required to place appropriate security officers/personnel on each ship, in each port facility and in each shipping company to prepare and to put into effect the security plans that will be implemented.

Security levels of ISPS code

The ISPS Code consists of two parts & three levels of security.

The parts of the ISPS code are:

Part A – These are mandatory provisions which talk about the employment of security officers in the shipping companies, their ships and port facilities that they call.

This also covers various security matters that need to be considered in the preparation of security plans to be implemented in the ships and port facilities.

Part B – These are recommendatory provisions providing guidance and recommendations on how the above security plans must be prepared and implemented.

The security levels are implemented by the local port authority under consultation with the government authorities. The security level adopted by the port facility must be co-ordinated with the ship for synergy.

The three levels of ISPS security are:

Security Level 1– normal – this is the level at which the ships and port facilities operate under normal conditions. Minimum protective measures will be maintained at all times.

Security Level 2 – heightened – this is a level that will apply whenever there is a heightened risk of a security incident. At this level, additional security measures will have to be implemented and maintained for that period of time. This time frame will be determined by the security experts on the ship or at the port facility.

Security Level 3– exceptional – at this level, it is considered that a security incident is imminent and SPECIFIC security measures will have to be implemented and maintained for that period of time. At this level, the security experts will work in close conjunction with Government agencies and possibly follow specific protocols and instructions.

Why is ISPS charged, who charges it and who pays for it?

The ISPS code must be implemented in its fullest form to ensure the safety and protection of all concerned. For a shipping line and port, it means additional expenses for the employment of qualified and trained personnel capable of implementing the security measures required by the code.

There is a lot of manpower, planning, and equipment that goes into the implementation of the ISPS code and to ensure the safety and security of the ship’s crew and the staff in the port.

To cover these costs, the shipping lines charge the ISPS surcharge.

A customer might get charged ISPS surcharge in the form of Carrier Security Fee and/or Terminal Security Charge.

Carrier Security Fee as the name implies is charged by the carrier to cover their cost incurred in implementing the ISPS code.

Terminal Security Charge as the name implies is charged by the port to the carrier to cover their cost incurred in implementing the ISPS code at the relevant port/terminal.

Typically the ISPS charges form part of the freight quote and is required to be paid along with the freight and therefore whoever pays the freight (shipper or consignee) will also pay the ISPS surcharge.

The quantum of the ISPS charges is set by the line depending on the port of call as some of these costs are variable.

Bearing in mind the constant threat of maritime piracy hanging over our heads, initiatives like ISPS provide us with much needed comfort in terms of protection of the cargo, crew and ships. Although this may come at a cost currently, in the long term, such initiatives have been designed to protect and benefit us.